Andy Burnham has got off to a good start.
He’s begun on a note of optimism and hope (in contrast to Sir Keir Starmer’s telling us, perhaps more truthfully, that things would get worse before they got better,) given a positive promise to abolish homelessness, and maintains momentum with a series of 6am treats (VAT on electricity bills abolished, bus fares capped at £2, and 20% off business rates for pubs and restaurants,. . . .and counting?)
Mr Burnham is displaying his common touch.
A friend of mine, lifelong Liberal/Liberal Democrat activist and experienced councillor, tells me she’s “quite excited.” The Liberal Democrat spokesperson has declared the party’s support, and Tory pedantic bleats of “Where’s the money coming from?” seem very “old style.”
However, the composition of the new cabinet gives pause for some misgivings.
I’m sorry that Ed Miliband has not become Chancellor of the Exchequer. As a former party leader he is both a “heavyweight” and has economic qualifications and previous treasury experience, - just the man to tame treasury intransigence and focus this most powerful department to service the government’s aspirations rather than stick to stale orthodoxy.
Shifting Mr Miliband to the Foreign Office also has a scent of moving the party’s most credible firebrand to pastures where he will have less time and opportunity to affect domestic issues.
It is good to see Miatta Fahnbulleh as Mr Miliband’s replacement as Energy Secretary. She is allegedly a powerful intellect, a qualified economist and clearly destined for the Treasury at some future date.
John Healey as Chancellor is all very well : he sounds a nice man much respected in the party. But as former Defence Secretary he will be more inclined to furnish further funds for the wasteful and prestige-prone military than for, say, overseas development.
It is sad that, as yet, there is been no mention by Mr Burnham of restoring the Aid Budget to 0.7% of GDP. It would also be nice to hear some prime-ministerial support for the UK’s other “world leading” area of expertise, the BBC, and save their boring us with desperate puffs of how good they are in order to escape de-funding,
There is little sign of any attempt to reduce “churn” in the cabinet (the switching of ministers to different departments before they’ve grasped the job.) Why, for example, is not Wes Streeting returned to the Health Ministry, where he is surely by now beginning to find his way around, rather than to Defence. Does he know anything about that?
However, one cabinet mister who retains her post and in my view shouldn’t is Shabana Mahmood, who remains at the Home Office and seems determined to continue the Tory Theresa May’s policy of a “hostile environment” for immigrants.
M/s Mahmood is herself a “person of colour” and of immigrant stock and seems to take that a as licence to be aggressive to immigrants, or at least some of them. (No one seems too worried about escapees from Trump’s America who as settling in the Cotswolds.) Her proposals on “indefinite leave to remain” and the possibility of deporting people who’ve been settled here for years, and their children, are despicable. I would have thought better of a Burnham Government.
There are also accusation of a fairly savage purge of Starmerite former cabinet ministers, who have not taken kindly to their dismissal. This could turn out to be an error. The last thing the country needs is factional discontent in the Labour Party, which the largely hostile press would do their best to amplify. The entire party should knuckle down and support what the vast majority of them wished for.
Mr Burnham’s over-all aim is to reverse the neoliberal creed of Margaret Thatcher which the establishment has followed for the past forty years.By way of privatisations with inadequate regulation, deregulation of the banking sector, sale of council hoses, reduction of the powers of local government, low taxation priority over public services, is responsible for most of the difficulties our country faces.
Good luck to him.
Post Script: since writing the above I have read today's paper and discovered that the reduction of the cap on our bus fares is to be funded from the Aid Budget. Oh dear.
Labour’s historical supporters are just as anti-immigration as those on the right. This is why Reform won big at the local elections in May in previous Labour heartlands such as Wakefield and Barnsley. Burnham has no hope of winning the next general election without showing strength on this issue which is why Mahmood remains in place. You are not going to convince people that a ‘kumbaya’ approach to immigration is the correct path. We have gone beyond this and for any hope of a progessive government beyond 2029 I’m afraid you will have get used to anti-inmigrant sentiment and action. It is beyond doubt that this is a vote winner.
ReplyDeleteAs for Ed Miliband, he is amongst the most negatively-rated politicians in the country. Placing him as Chancellor would be political suicide.
"Labour’s historical supporters are just as anti-immigration as those on the right."
DeleteNot true.
Polls indicate around 25% of Labour voters want immigration reduced compared with around 75% of Tories and around 85% of Reform (YouGov, Migration Observatory, Kantar)
My goodness, it's like opposite day. Everything good is bad and everything stupid is clever.
ReplyDeleteI do have one question.
the neoliberal creed of Margaret Thatcher
I'm pretty sure Mrs Thatcher never used the word 'neoliberal'. I can think of many terms to describe Mrs Thatcher's creed ('monetarist', primarily, also 'free market', very much 'anti-statist', etc etc) but 'neoliberal' would not be one that sprang to mind.
So: how are you defining 'neoliberal' here and how does it match Mrs Thatcher's creed?
Primacy of the market;
ReplyDeleteMinimum role for the government;
Private rather than public sector;
Low taxation;
Minimum regulation;
There is no such thing as society.
Yep, those are accurate aspects of Mrs Thatcher's creed (and are all good things, at least if you think that the state exists to enable the individual, rather than the individual existing in order to work for the state).
DeleteI just wonder why you use the silly term 'neoliberal' when a term like 'free-market' or 'anti-state' would be firstly more accurate, secondly clearer to people not indoctrinated into thee jargon, and thirdly more like how Mrs Thatcher would have described her own creed?
There is no such thing as society
Just to check: you do know what Mrs Thatcher meant by that, right? I only ask because a lot of people seem not to have actually heard the full answer from which is taken, and think she meant something like 'there's no such thing as society, so just look out for yourself and everyone else can go to Hell'; which is in fact the opposite of what she was saying.
She was saying 'people these days want "society" to help them, but there's no such thing as "society"; there are just individual people and families, and so instead of looking to pass the responsibility for helping others to some mythical thing called "society", we all need individually to get stuck in and help our neighbours ourselves.'
Which is, you know, totally correct.
Burnham's accession seems to have been accompanied by a sense of relief (that we may get a period of political stability) and optimism (about his competence and ability).
ReplyDeleteWhether these materialise or last is another matter as national politics and politicians seems intent on self-destruction and its worth noting some of the negative coverage some some of the Starmer supporters already.
It's also interesting that he's deliberately drip feeding a few good-news daily changes (albeit small) to try to convince people that he means what he says.
Whatever you want to call it ( neoliberal, free market ...) let's hope we at last have a PM who has a different vision for the country. And I have no problem if we try to recover a social attitude of "what can I do for my community" rather than what can I get from my community
And I have no problem if we try to recover a social attitude of "what can I do for my community" rather than what can I get from my community
DeleteNo no we don’t want that. ‘Community’ is just as non-existent as ‘society’ and doing things ‘for the community’ often ends up with vague abstract things that nobody wants.
The attitude we should have is ‘how can I help my neighbours?’ Not some vague idea of a ‘community’ but the real living people in your street or round your corner. Go and help them with their concrete problems rather than thinking some airy ideas about ‘community’.
My neighbours ARE my community. Arguing there's no such thing as community or society is semantic nonsense
DeleteMy community council organised support for households in the community during Covid
My community council organises a local bus to/from the main town several times a week for those without transport
My community council has organised sponsorship to construct a 5 mile walkway/cycle path to the next village
My community council has set up a community cafe
My community council organises an annual cycle festival
NONE of this was done by individuals but by neighbours working together - the whole is greater than the sum of its parts
A shame you don't live in a community like mine
I forgot ....
DeleteMy community council has installed a small hydro scheme
My community council is raising funds to buy land that will be developed for local social hosing
my community council successfully campaigned to keep the local primary school open.
all done collectively by the community and not by individuals
"ask not what my community can do for me but what can I do for my community"
A shame you don't live in a community like mine
DeleteA shame you don’t value people as individuals.
And I sincerely doubt your ‘community council’ did any of those things. Organised a local bus? Installed a hydro scheme (whatever that is, I bet it doesn’t help anybody). The kind of people who get on ‘community councils’ are insufferable middle-class busybodies who can’t fit a lightbulb, let alone a ‘hydro scheme’ and who wouldn’t even know how to get a public vehicle licence. And did they pay for these things out of their own pockets?
DeleteI doubt they did any of that, so don’t give the credit to the ‘community council’, give the credit to the people who paid for these things, and the people who actually did them. Not the useless apparatchiks who ticked boxes.
your demonstrating your ignorance and prejudice yet again.
DeleteThe CC is run by local INDIVIDUALS who come together for the benefit of the COMMUNITY
The local hydro scheme generates electricity that lowers the bills of INDIVIDUALS in the COMMUNITY
And there were no apparatchiks involved - local individuals working together for the benefit of the community at large not themselves as individuals. Isn't this what you favour rather than big state?
The CC is run by local INDIVIDUALS who come together for the benefit of the COMMUNITY
DeleteThen say what those individuals actually did.
The local hydro scheme generates electricity that lowers the bills of INDIVIDUALS in the COMMUNITY
How? By tapping into government subsidies? Then it’s not the ‘hydro scheme’ that should get the credit for reducing bills, is it? It’s the taxpayers who paid the money that is being given out in subsidies.
local individuals working together for the benefit of the community at large not themselves as individuals
Someone who wants to be on a ‘community council’ is more interested in themselves — in the status of being a ‘community councillor’, or in the opportunity to reshape the neighbourhood by implementing their preferred policies. If they just wanted to help people they would just do that.
so here's a conundrum for the neoliberals who don't believe there's such a things as community or society
DeleteWhere I live there's a demand for reliable and regular transport to the nearest large town (40 mile round trip) which is the only place for miles that has shops, banks, clinics, libraries etc
So you'd think given there's a demand there would also be a supply
But... the private sector can't make money on the service so has pulled out
And good neoliberals won't spend taxpayers money subsidising/providing such a service
So what to do?
Tell the locals - tough but you shouldn't live here if you can't afford your own transport
Look round for a rich philanthropist who can fund a good public deed?
or watch the local community use its own funds (it's a registered social enterprise after all) to subsidise a service that meets local community needs.
A no-brainer for the likes of me (but perhaps not for the no-brain neoliberal supporters)
the private sector can't make money on the service so has pulled out
DeleteGiven the situation as you've described it, I don't see how that could be true.
Let's go through it.
Let's assume there is a demand for X journeys a day on this route, and the cost of runing the service is Z, and the ticket price is Y.
So the private sector can make money if, and only if,:
X x Y > Z
Let's, for simplicity, assume X and Z are fixed (X because that's the number of people who want to get into down, Z because running a bus costs pretty much the same whether it's full or empty or anywhere in between).
So the obvious solution is just for the private company to increase Y until the inequality is true. Problem solved!
Of course, in the real world, if Y goes too high then the people who want to go into town might not be able to afford it. That's usually what people mean when they say 'the private sector can't make money'.
But in this case, you say the 'community' has added in a subsidy. So the equation becomes:
X x Y + S > Z
But the thing is, if the community has the money to put in a subsidy, then the community must also have the money to pay the higher prices! There's nowhere else, in this closed system of 'the community' for the money to come from! According to you 'the community' has £Z available to spend on transport. They must do, because that is what they are paying in the form of X x Y + S. So if they could pay it in that form, they could equally pay it in the form of X x Y', where Y' is whatever ticket price per-journey is needed to make the maths work.
So I can't answer your question because I don't understand how it can be true that 'the private sector can't make money on the service'. Why did the private sector not just raise the ticket price until they could make money? We know that the community can afford the higher ticket prices, because they could afford the subsidy, which mus, by maths, be exactly the same amount that the increase ticket prices would have raised!
(And this leaves out the fact that, in the real world, Z will probably be less for the private sector because a private-sector bus company running lots of routes probably has economies of scale that a little 'community-run' service doesn't, so in fact that amount the 'community' is paying for bus transport is probably significantly more in the subsidy model than it would be in the private-sector model, so the community has actually made itself less well off by its stupid decision to pay an unnecessary subsidy.)
DeleteOh dear. You need to read one of my introductory economics textbooks.
Delete"Let's assume X (number of passengers) is fixed"
DeleteFraid not. You clearly haven't heard about the demand curve - Qd = f(P)
You clearly haven't heard about the demand curve
DeleteI have heard of it, but surely it doesn’t apply here? The reason given for going into town is that it is ‘ the only place for miles that has shops, banks, clinics, libraries etc’.
If that’s true, then trips into town aren’t luxuries — they are a necessity.
And if tried into town are necessities, not luxuries, and if people have no other way of getting into town because they have no private transport (again assumed in the situation: ‘ you shouldn't live here if you can't afford your own transport’) — incidentally also the only moral case for a subsidy — then demand must be inelastic, right?
If you haven’t come across the concept of inelastic demands then I think you need to read an economics textbook.
And if demand is elastic, then that means that people don’t need the bus to get into town, doesn’t it? Either they don’t need to go into town and could get all of their needs some other way (eg shopping delivery services, remote banking) or they have alternative means of getting into town (eg they own cars).
DeleteAnd if those are true, and going into town on the bus is a choice not a necessity , then they shouldn’t be subsidised, should they? We shouldn’t subsidise people’s individual choices based on their own preferences. We should only give subsidies to help people with essentials and necessities.
Oh, and I’m not a ‘neoliberal’. Or a ‘liberal’. I’m a conservative.
DeleteOh dear
DeleteYou don't understand the concept or principles behind either demand or subsidies do you? Fortunately Burnham does
Here's a scenario.
The CC initially subsidise bus travel for those who REALLY need it.
But then other individuals start to use it also because they choose to - visiting friends, heading to the cinema, the pub .... and suddenly demand takes off and so does the bus company's revenue without having to put fares up!
Must be lonely being a conservative these days and knowing Badenoch will never be PM
You don't understand the concept or principles behind either demand or subsidies do you?
DeleteI mean… yes I do? I haven’t got anything wrong above.
Here's a scenario.
Nothing in your scenario changes anything I wrote above. X is the minimum demand, and Y’ remains the price at which the service is viable at minimum demand, and the ‘community’ is able to pay X x Y’, and therefore there is no reason to pay a subsidy — just set the price at the correct level (which we know is affordable) and the service will run.
So the idea that ‘the private sector can’t afford to run the service’ still doesn’t make sense. The private sector can make money from the service, provided they set the fares at a level to cover the costs based on the minimum demand. So there is no need for any subsidy.
Badenoch will never be PM
DeleteOh, she will be. Ed Davey, on the other hand…
Oh dear again.
Delete"So the idea that ‘the private sector can’t afford to run the service’ still doesn’t make sense. The private sector can make money from the service, provided they set the fares at a level to cover the costs based on the minimum demand. So there is no need for any subsidy."
There's no such thing as "minimum" demand. Demand is a variable linked to the price (fare) charged). The higher the price/fare then the lower the demand - basic economics
The reason the service isn't viable for the private operator is that their operating costs are high meaning that they would have to charge a high price/fare which in turn reduces demand to a point where it's not profitable.
PS don't apply for a job as Chancellor
than the revenue they would get given they
So why isn't there a non-subsidised bus service?
The reason the service isn't viable for the private operator is that their operating costs are high meaning that they would have to charge a high price/fare which in turn reduces demand to a point where it's not profitable.
DeleteOkay. So where ‘Mik W’ wrote above: ‘Where I live there's a demand for reliable and regular transport to the nearest large town’, that was in fact a lie. There is in fact no demand for such a service at an economically viable price.
That will be what was confusing me; I was trying to make sense of the situation as stated. But if the statement was a lie (it said there was demand, in fact there isn’t viable demand) then I am no longer confused.
But in that case we are back to: the subsidy is being offered in order to give people a service at an economically inviable price, because if the service was priced properly they would choose to not to use it (and presumably drive instead).
In what world is that a good use of money? If my money were to be used to subsidise bus fare for people who didn’t need the service but just didn’t want to pay the proper price, I would be up in arms; would you not? Why should I subsidise people who could either pay the full price or use alternative methods but simply choose not to? If it’s their choice, and not a necessity, they should pay the full costs of that choice, shouldn’t they?
I’m pretty sure what really happened was something along the lines of
DeleteResidents: can have bus pls
Bus company: Certainly, we have measured demand and done the sums, it will cost Y per journey.
Residents: lol at that price we’ll keep driving into town
Bus Company: Fair enough, sounds like you didn’t really want s bus service anyway.
Community Council: oh noes we are a bunch of insufferable busybodies who think we know what people should want better than their own revealed preferences and we think cars are evil even though we ourselves drive everywhere, not having a bus looks really bad, I know, we’ll virtue signal by bunging a load of other people’s money to someone to drive empty buses to town and back
Bus Operator: Yay I get a guaranteed subsidy and I don’t even have to carry any annoying passengers!
"Where I live there's a demand for reliable and regular transport to the nearest large town’, that was in fact a lie. There is in fact no demand for such a service at an economically viable price."
DeleteTut tut
You've added your own rider to my comment - "at an economically viable price"
There is no economically viable price that the locals can afford - but there is still a demand
There is no economically viable price that the locals can afford - but there is still a demand
DeleteSo that's wrong on two levels.
Firstly, you need to refer back to those economic textbooks on what 'demand' is. Economically 'demand' doesn't just mean 'people wanting things'. That's just wishes. Demand is people willing to pay a certain price. If a gadget costs £100 to produce, and people want the gadget, but they are only willing or able to pay £80 for it, then there is no economic demand for the product. It doesn't matter, economically, that people may want it. Economically, that's not demand. That's just wishes.
So if people won't use the buses at an economically viable price, then there is economically no demand for the buses. It doesn't matter that people may want the buses, Economically, that's not demand. That's just wishes.
People can wish for all sorts of things. Little girls can wish for ponies. I can wish for a gold toilet. That's not demand in economics.
You're trying to equivocate between the everyday meaning of 'demand' and the economic meaning, and you shouldn't.
Secondly, the locals can afford the economically viable price. We know that because the economically viable price is (X x Y + S), and all of those, in the scenario you've sketches, are paid by the locals: the locals pay (X x Y) in ticket prices, and the locals pay S in subsidy.
Given that all these re paid by the locals, the way the locals pay is economically insignificant. Instead of paying (X x Y + S), they could equally well pay the same amount as (X x Y') — no subsidy, higher ticket prices. It's the same people paying (the locals) and the same amount of money, so clearly the locals can afford to pay it.
The only difference is that in the subsidy case the true cost is hidden at the point of purchase.
This is a bad thing: people should be able to see at the point of purchase the true cost of what they are buying not have part of the cost hidden in their tax bill.
So yeah. You're wrong on two counts there: if it were true that the locals couldn't afford the true economic cost of the service then you would be wrong, economically, to say that there was demand. But in the scenario you have described, in fact they are able to afford the true economic cost, they are just paying it as a subsidy plus a reduced ticket price instead of as the true ticket price; in which case the subsidy should be done away with and tax bills reduced so that people could pay the same amount as higher ticket prices because that would give them a truer understanding of the real economic cost of the service they were using instead of having the true cost hidden by a subsidy.
you know, if I were you I'd be embarrassed at demonstrating my ignorance of economics to the world
Delete"Demand is people willing to pay a certain price"
For once you're almost right but you then go on to show your misunderstanding.
My neighbours have a demand for a bus service AND are willing to pay a certain price. They don't expect a free service - they expect to pay and are willing to do so.
However, on the SUPPLY side - which is where the problem is - the bus company are unable to offer the service at that price. The DEMAND is still there - its latent demand.
.
You're also confused about the subsidy element.
DeleteAny subsidy is paid for collectively by the community - not by the individuals actually using the service who by definition cannot afford to pay the full economic cost. If they could there wouldn't be a need for a subsidy
Whether a subsidy is "a bad thing" has little to do with economics - it's about personal moral philosophy and beliefs. Do I personally believe that in some circumstances its a "good thing" to subsidize some goods & service?
Absolutely.
Is every subsidy a "good thing". Absolutely not
My university education many years ago was "subsidised" as there's no way either me or my parents could have paid the full cost (which I've paid back multiple times through higher tax payments).
Are agricultural subsidies to farmers a "good thing"? Yes if you want to achieve food security in increasingly turbulent times or you want to encourage better environmental practices that prevent pollution
Are subsidies to pubs through a cut in business rates a "good thing". For me, no
Economics doesn't come into play about whether a subsidy is good/bad but about identifying and quantifying the impact (intended or otherwise)
You'd better do some more reading
My neighbours have a demand for a bus service AND are willing to pay a certain price. They don't expect a free service - they expect to pay and are willing to do so.
DeleteIf they are not willing to pay the economically viable price then it’s not real demand. But in your scenario they are willing to pay the full price — but only if they pay some part of it as a subsidy rather than per-ticket.
However, on the SUPPLY side - which is where the problem is - the bus company are unable to offer the service at that price.
Then the service is not economically viable and shouldn’t run. The money for it would be better spend on something else.
But as I keep saying, in your scenario, the bus company are willing to offer the service at a price the locals are willing to pay. The locals just have this weird irrational desire to pay the price as (X x Y + S) rather than the more sensible (X x Y’). That’s what’s mad about this situation. The locals are willing to pay the full price.
The DEMAND is still there - its latent demand.
‘Latent demand’ isn’t a meaningful concept. You could say there’s ‘latent demand’ for anything if you make the price unviable. If you sold Bentleys for £1,000 a pop loads of people would buy them. Is there massive ‘latent demand’ for Bentleys? No, because that’s a fictional price. If the ‘latent demand’ only exists at a price where the good isn’t economically viable, then it’s not real demand in the real world. It’s just, as I said above, wishes and dreams like my wish for a Bentley for a grand.
But again this is irrelevant because, in your situation, the locals are willing to pay the full price that the bus company needs to run the service. They just want to do it in this crazy two-part way with an unnecessary subsidy rather than the more sensible way of having a ticket price that covers the costs.
"people should be able to see at the point of purchase the true cost of what they are buying not have part of the cost hidden in their tax bill."
DeleteAbsolutely agree
Let's tell everyone what the "true" cost of a hip operation on the NHS is
and the "true" cost of Tesco selling milk below cost
and the "true" cost of a litre of diesel
and the "true" cost of a pint of beer
Any subsidy is paid for collectively by the community - not by the individuals actually using the service who by definition cannot afford to pay the full economic cost.
DeleteOh, I see. In that case the correct thing is obvious. The bus company should run the service and charge the economically viable price, and any time someone who can’t afford the full price wants to go into town, they should go to one of their richer neighbours and say, ‘I want to get the bus but I can’t afford the full fare, this is what I’m willing to pay, can you give me the difference?’
That, after all, is exactly what is happening with the subsidy, right? So it should be made explicit that that is what is going on.
and the "true" cost of a litre of diesel
Deleteand the "true" cost of a pint of beer
That's a good idea actually. It could do with being more widely know that about 47% of the price of a litre of diesel (50% for petrol) and 33% of the price of a pint is tax. It might encourage people to be more active in looking for ways to reduce the tax burden.
They ay that ignorance is bliss ... you must be one of the most blissful people on the planet
DeleteYou say ‘Latent demand’ isn’t a meaningful concept.
"Latent demand exists when there is willingness to purchase a good or service, but where the consumer lacks the purchasing power to afford the product."
You also keep using the phrase "economically viable price".
This is a meaningless phrase (try looking it up for a definition). I can only assume you mean breakeven price - ie a price that allows the supplier to breakeven and would be the minimum price the supplier is willing to accept.
In the case of subsidised public transport (or any other subsidised good) this breakeven price is higher than consumers are willing or able to pay. QED
Latent demand exists when there is willingness to purchase a good or service, but where the consumer lacks the purchasing power to afford the product
DeleteSo is there latent demand for Bentleys because lots of people would buy one for £1,000? Is there latent demand for ponies from all those little girls? If you just call 'latent demand' anything where people would buy the thing if it was cheap enough then there's infinite latent demand for everything, and that's a meaningless concept.
In the case of subsidised public transport (or any other subsidised good) this breakeven price is higher than consumers are willing or able to pay.
Right. In which case the good should not be supplied because the resources are more efficiently deployed doing other things.
But in this scenario the local residents are willing and able to pay the breakeven price. We know that because they do pay it. They just pay it in the form of the subsidy. But that's still them paying the price.
(Actually I might accept the concept of 'latent demand' as meaningful where there is demand at the market price that isn't being met because of a supply constraint. For example, there is latent demand for housing: people are willing to pay the market price, but the houses just aren't there to buy. But that isn't the scenario here, where there is no supply constraint -- the bus is there -- and also there is no problem with paying the breakeven price.)
Deleteyou don't listen or learn do you? Check the various Economics websites for latent demand.
DeleteBTW did you find your wonderful phrase "economically viable price" anywhere?
you don't listen or learn do you? Check the various Economics websites for latent demand.
DeleteYou're just repeating yourself now, not addressing any points. I assume this is because you have no responses because you know I am right.
BTW did you find your wonderful phrase "economically viable price" anywhere?
Do you find it a difficult concept to understand? I will help you out. The economically viable price is the price at which a product or service can be sold where the demand will be sufficient that revenue will cover costs, and therefore the good or service is viable, economically.
Oh dear.
Deleteso
a) you haven't bother researching "latent demand" which would contradict your view that its "meaningless"
b)"revenue will cover costs" = breakeven price then not economically viable price a phrase you've made up that doesn't exist anywhere else!
Wonderful nonsense
a) you haven't bother researching "latent demand" which would contradict your view that its "meaningless"
DeleteYou clearly don't have any argument against my point, or you would have given it, instead of resorting -- yet again -- to pure insult. Indeed insults seem to be your entire contribution to this page. I presume that is because you know I am right and it annoys you.
b)"revenue will cover costs" = breakeven price then not economically viable price a phrase you've made up that doesn't exist anywhere else!
What a bizarre world this would be if nobody was ever allowed to use a phrase unless someone else had used it first. If it's clear what the phrase means, who cares whether it has been used before?
but it's not clear is it?
DeleteAnd once again you're simply demonstrating your own ignorance of the economics behind subsidies
"the bus company are willing to offer the service at a price the locals are willing to pay"
No it isn't.
The local company is offering to supply a service at a price that will allow it at least to breakeven (and remind yourself - if you ever knew - that breakeven to an economist is different to that of an accountant) the locals are unable/unwilling to pay so no service is available under these circumstances.
The point of a subsidy is to shift the entire supply curve downwards so that the equilibrium price is lowered
Here's a simple explanation for you
https://www.economicsonline.co.uk/competitive_markets/subsidies.html/
but it's not clear is it?
DeleteI mean, yes it is.
the locals are unable/unwilling to pay so no service is available under these circumstances.
But that's not true. In the scenario given, the local residents are paying the full cost of the service -- some int he form of ticket prices, and some in the form of subsidies.
The point of a subsidy is to shift the entire supply curve downwards so that the equilibrium price is lowered
Yes. No one denies that. But the point is that subsidies don't come from the magic money tree. The subsidy is paid (in this scenario) by the local residents.
Hence the local residents are in fact paying the whole cost.
Of course this may not be the same local residents: the richer local residents may be paying the subsidy, while the poorer local residents enjoy the reduced fares.
Which is why I say that the correct solution of for the fares to be set at the higher level, and demand maintained, instead of by a subsidy, by the poorer residents asking the richer residents for help with the fares directly.
This is, after all, exactly what is happening with the subsidy, isn't it? It is a transfer of wealth from the richer residents (who can afford the higher fares and more) to the poorer ones (who cannot afford the higher fares).
Therefore the correct ting to do is to make it explicit that this is what is happening, so everybody knows where the money is coming from and what is really happening, and no one can pretend that the whole thing is being enabled by the wand of the subsidy fairy who just magics up money out of nowhere so the fares can be lower.
The money for the lower fares is coming out of the pockets of the richer residents, so the poorer residents should have to ask them for that money and say 'thank you' every time they ride the bus.
but it's not clear is it?
DeleteI mean, yes it is.
As usual you've misunderstood.
"What a bizarre world this would be if nobody was ever allowed to use a phrase unless someone else had used it first. If it's clear what the phrase means, who cares whether it has been used before?"
Good communication implies that you're using terminology that's accepted and understood -
making up your own meaningless phrases is self -defeating and pointless. even if it gives your own ego a boost
making up your own meaningless phrases is self -defeating and pointless
DeleteExcept it wasn't a meaningless phrase; it was a phrase with a clear meaning which you understood.
Deletethe locals are unable/unwilling to pay so no service is available under these circumstances.
"But that's not true. In the scenario given, the local residents are paying the full cost of the service -- some int he form of ticket prices, and some in the form of subsidies."
You keep repeating the same point without justification as if saying it repeatedly makes it right.
there is no local bus service on offer from the private sector; the market price to be charged means that demand is too low for the company to turn a profit; therefore there is no local bus service
The CC - a profitable social enterprise (no taxpayers money as income) - is using some of its profit for the benefit of the wider community by subsidising the bus service.
The "rich" are not subsidising the "poor" as they're not being taxed for this money
If (!!!) you were able to understand the link I supplied you would understand that its a win-win situation - individuals benefit; the community as a whole benefits; the private bus company benefits
Even Thatcher would approve
there is no local bus service on offer from the private sector; the market price to be charged means that demand is too low for the company to turn a profit; therefore there is no local bus service
DeleteWhich would mean, all else being equal, that the bus service is a waste of economic resources that would be better spent elsewhere.
The CC - a profitable social enterprise (no taxpayers money as income) - is using some of its profit for the benefit of the wider community by subsidising the bus service.
Tell me more about this 'CC' then. Where does it get its income? Does it sell donated items? Does it take donations directly? Does its income come only from local residents or does it get external income too?
Unless I know that then I can't fully understand the scenario.
The "rich" are not subsidising the "poor" as they're not being taxed for this money
They are if, for instance, they are donating the money rather than being taxed. Which is why I need to know the source of income of this 'CC'.
"Unless I know that then I can't fully understand the scenario."
DeleteEnough said!
So lets cut to the chase.
Any situation (forget the bus) where you would support a subsidy being given?
Enough said!
DeleteSo what's the answer?
Any situation (forget the bus) where you would support a subsidy being given?
I wouldn't rule anything out entirely. But in general, I think subsidies are a bad idea; if something isn't viable on its own terms then there's probably a good reason for that. The costs of a service should be borne, as fully as possible, by the users of that service. Otherwise you're just spending other people's money on other people, and so you have no incentive to get either good service or value for the money.
Also quite often subsidies are use to try to encourage people to buy things that they don’t want but that the busybodies setting the subsidies think they ought to want. Which is patronising as Hell as well as a waste of money.
Deletesince writing the above I have read today's paper and discovered that the reduction of the cap on our bus fares is to be funded from the Aid Budget
ReplyDeleteThat’s not true. The proposed funding is from ‘converting aid grants into loans’.
But seeing as there’s no detail on what that might mean, and zero practical chance of these ‘loans’ ever being repaid anyway, there is just an accounting trick: claim a gift is a loan, and inside of appearing on the balance sheet as a loss is appears as a asset. Then you can spend the same money again on something else and look no worse off; until you have to write the loan off, but hey, that’s the next guy’s problem.
So this is basically an unfunded policy (just like the proposed VAT cut on energy, allegedly funded by scrapping the digital ID scheme — but no funding had ever been allocated to the digital ID scheme).
Mr Burnham is trying to buy people’s affections by promising them goodies, but we shall see what happens at the budget when the bill comes due. Either a lot of these things won’t actually happen, or to pay for them there will have to be unpopular tax rises.
What you say is strictly speaking true: this is an accounting trick. However, it is not true that the trick is of no consequence to the recipients. Many very poor countries struggle to repay what are loans rather than gifts, often spending more on servicing their debts than the do on health and education. Burnham 's trick is not a harmless ruse.
ReplyDeletePeter, as you know the UKs aid budget is a soft target for cuts - such cuts are unlikely to lose many votes unfortunately
DeleteA lot of these countries have despotic leaders who are creaming the aid off for themselves through ghost projects and crony procurement. I doubt they’re bothered by debts becoming due. What’s the sanction if they don’t pay them anyway?
ReplyDelete"A lot of these countries have despotic leaders who are creaming the aid off for themselves through ghost projects and crony procurement."
DeleteOh no you've been reading the Daily Mail again!
Evidence?
"A lot" - how many and which ones?
"Crony procurement"
You mean like the UK's PPE procurement "a botched pandemic procurement response that left frontline workers exposed, weakened the pandemic response and wasted £10 billion of public money."
And what sanctions against those responsible for this? A peerage!
Mobutu Sese Seko turned Zaire into a kleptocracy. Over three decades he siphoned billions in foreign aid and state revenue, funding palatial European estates while national infrastructure deteriorated and public services collapsed.
DeleteDuring Ethiopia’s 1980s famine, Mengistu Haile Mariam weaponised humanitarian relief. Aid was redirected away from opposition regions and used to sustain the Derg’s military campaigns, worsening starvation and displacement.
The Gambia’s Yahya Jammeh misappropriated over $1 billion in state funds and donor money, spending it on private jets, luxury cars, and overseas properties.
so 190+ countries in the world - so 3 is "a lot"?
DeleteZaire ceased to exist as such in 1997
Ethiopia in the 1980's? 40 years ago and Gambia 10
Nothing more recent?
try the UK instead
You mean like the UK's PPE procurement "a botched pandemic procurement response that left frontline workers exposed, weakened the pandemic response and wasted £10 billion of public money."
DeleteThere was no corruption or cronyism in HM government’s PPE procurement.
There was plenty of waste, and a huge amount of incompetence, and many many unwise decisions — but what else would you expect from the public sector?
But the enquiry, and I quote the chair, Baroness Hallett, found ‘no evidence of cronyism or corruption’.
See: https://www.bbc.co.uk/news/articles/czrxrlydyzzo
Maybe she didn't look hard enough
DeleteMaybe she didn't look hard enough
DeleteYou mean Baroness Hallett is in on the conspiracy?
could be. Doesn't the Establishment always look after its own?
DeleteDoesn't the Establishment always look after its own?
DeleteWow. You're way, way way down the rabbit-hole.
But, based on what Baroness Hallett has written in previous chapters of the inquiry's report, it doesn't seem likely that she has any interest in covering-up the misdeeds of the government of the time (quite the reverse, she has been rather unstinting in her criticism of that administration at all levels) and so it seems unlikely that she wouldn't have looked for evidence of corruption or, having found it, that she would refrain from publishing it.
I'm not the only one ....
Delete"The families group has always believed that this system, which paid £4.2bn to companies whose contracts were processed via the VIP lane, institutionalised corruption and cronyism."
Guardian
"The families group has always believed that this system, which paid £4.2bn to companies whose contracts were processed via the VIP lane, institutionalised corruption and cronyism."
DeleteThey may believe whatever they like, but the inquiry looked for actual evidence of corruption and found none. So their belief, so far as can be ascertained, is mistaken.
There was no corruption; merely massive, massive incompetence.
Never said it wasn’t a thing in the UK.
ReplyDelete